The Mortgage Market Review (MMR) was a reaction to the height of house prices in 2007, just before the so-called credit crunch. While rules around mortgages meant many people could take out a mortgage, it also allowed a minority to borrow recklessly, and the MMR is designed to prevent that from happening again.
Below is our brief 5-point summary of the MMR Final Policy Statement and how it will affect your mortgage application when you buy your next home:
- Introduction of an affordability assessment. Borrowers will be assessed in detail on their income and outgoings, including whether or not they have children, amount of direct debits and standing orders, etc. This will affect the salary multiplier that determines how much you can borrow.
- Ban on self-certification lending. This was often used by borrowers with sizeable deposits or by self-employed applicants. Income verification is now mandatory.
- Ban on lending to applicants with multiple high-risk characteristics, e.g. high loan-to-value and poor credit rating.
- Interest rate stress tests. The Bank of England’s base rate has been at a record low of 0.5% since 2009. Prior to this it had been 5.75% during the latter half of 2007. Standard variable rate and tracker mortgages are linked to the base rate, thus if interest rates go up, so do a borrowers mortgage payments. Lenders will now make an assessment on whether a borrower could afford to make repayments should the base rate increase, which many predict it will soon.
- Replacement of Initial Disclosure Documents with the requirement for mortgage brokers/lenders to disclose key messages to the borrower; key facts will be changed to reduce the volume of information and make it easier to digest.
Jeffries Mortgage Solutions can help you find the best mortgage and advise you with your application. Contact us to arrange a no obligation consultation.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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